Not sure what to do

running_for_the_hills

Hi please excuse my ignorance but this pension stuff is a mine field! Just a bout to reach the 55 bracket :T I have just received a statement from a couple of pension providers and wondered if you knowledgeable people out there could help me.... What I'm trying to achieve is lump sum payments as its relatively small amounts and this would make us mortgage free :j:j:j:j:j:j

JoeCrystal

First of all, welcome to the pension forum, Running for the hills!

It is certainly worth for you to get in touch with The Pensions Advisory Service for free and impartial guidance.

I am afraid you have not provided any information at all for us to form a variety of opinions. So what do your statements from all your pension providers/administrators say then? And what is exactly is your goal here?

running_for_the_hills

Sorry I posted to quickly was trying to edit and my WiFi went down.... basically I have two small pensions I have just received statements from them.

1. Defined benefit scheme transfer value of £24,348, they have give figure for a small monthly income and tax free lump sum also.

2. Aegon small pot of £8,400

My question is can I take both of these as small pot payments? I understand it’s taxable? Thanks

Dazed_and_confused

And are you already earning at a level where taking the pensions all in one go would result in a lot of (potentially avoidable) tax being payable?

Dazed_and_confused

I understand it’s taxable?

But at what rate(s)?

20-21%, 40-41%, 45-46% or even the dreaded 60%+?

Would it matter if they weren't classed as "small pots"?

Are you certain giving up the DB pension is the right thing to do?

running_for_the_hills

Dazed and... yes I work and would be subject to tax.

LHW99

And what do you plan to live on when you finally retire ifyou take out these pensions?

running_for_the_hills

20% I currently work 24 hours a week. The income they have given on the DB scheme is is about £28 per month and £2.5k tax free lump sum. I though it made sense to pay mortgage off and be mortgage free instead of tiny amount each month

running_for_the_hills

We do have savings and hubby has good pensions we share our finances

Marcon

running_for_the_hills wrote: »

1. Defined benefit scheme transfer value of £24,348, they have give figure for a small monthly income and tax free lump sum also.

2. Aegon small pot of £8,400

My question is can I take both of these as small pot payments? I understand it’s taxable? Thanks

1. The DB scheme won't be able to 'commute' (pay the whole lot as cash) because your total pension benefits including Aegon are more than £30K. If you want to take it all as cash, you'd need to transfer out of your DB scheme to some sort of personal pension arrangement. 25% would be tax free, the balance is potentially taxable at your marginal rate (i.e. the highest rate of tax you pay, including the taxable part of your pension).
2. Yes, it's under £10K so you could take as a 'small pot'. Again, 25% tax free, balance taxable.

AnotherJoe

running_for_the_hills wrote: »

20% I currently work 24 hours a week. The income they have given on the DB scheme is is about £28 per month and £2.5k tax free lump sum. I though it made sense to pay mortgage off and be mortgage free instead of tiny amount each month

It may do but but certainly doesnt make sense to take out so much in one tax year that you get bumped into a higher tax bracket and and needlessly pay tax when by taking over two or three tax years you don't literally just give money away.
Also, and no offence meant but these are relatively small amounts of money, if that would pay your mortgage off the payments must be very small so other than the feeling of being mortgage free, financially it's niot going to make much difference is it? What's the rush in paying it off if that involves extra tax?